SEOUL: South Korea’s economy bounced back last quarter, buoyed by booming exports of data memory chips and a boost from government spending, although private consumption was sluggish.
Yesterday’s Bank of Korea GDP report showed the economy expanded 1.1% in the first quarter, rebounding after contracting by 0.2% in the fourth quarter and beating the 1% forecast in a Reuters poll. Export volumes, particularly for memory chips and other IT products, gained 4.4% and added to growth.
Samsung Electronics, South Korea’s world-leading tech exporter, posted a record quarterly profit of 11.6tn South Korean won ($10.75bn) yesterday thanks to booming sales of semiconductors used in servers.
The upbeat data drove the benchmark Kospi index 1.1% higher as of 0552 GMT, while yields on 10-year treasury debt fell to 2.754% from 2.762% on Wednesday’s close.
The chip boom has offset soft domestic demand and the blow to tourism from diplomatic tensions with China over South Korea’s installation of a US THAAD missile defence system.
Private consumption, which accounts for about half of GDP, marked its slowest growth in a year, gaining a mere 0.6% from the previous quarter.
The service sector grew 0.9% on-quarter, but output of food and lodging services declined 0.9% even as South Korea hosted the Winter Olympics in PyeongChang in February-March.
“The food and lodging sector is still suffering from fewer Chinese tourists as part of the THAAD backlash,” said Chung Kyu-il, a director general at the Bank of Korea. “People also went out less due to the cold wave and fine dust issues,” Chung said. Chung said 4.1% growth in service sector output from ‘cultural activities’ reflects a boost from the Winter Olympics, reversing the service sector’s 1.8% fall in the fourth quarter. In annual terms, GDP rose 2.8% in the first quarter, on par with a 2.8% rise in the fourth quarter.
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